Strict Liability, Negligence, and Drivers Suppose we believe the following facts
ID: 383456 • Letter: S
Question
Strict Liability, Negligence, and Drivers
Suppose we believe the following facts about car drivers and bicyclists:
•Driving more carefully reduces the probability of causing an accident, but bicycling more carefully does not change the probability of being hit – other than riding less, there is nothing bicyclists can do to reduce the likelihood of an accident
•On weekdays, most car drivers are just commuting to and from work, so the amount they drive is very inelastic (very unresponsive to incentives)
•Bicyclists, on the other hand, area mixture of commuters and pleasure riders, so the number of bicyclists is more responsive to incentives
Given these facts,
(a) Explain why a strict liability rule would lead to the efficient level of precaution by drivers.
(b)Explain why a strict liability rule would not lead to the efficient number of weekday accidents. Would bicyclist activity be higher or lower than the efficient level?
(c)Explain why a simple negligence rule would lead to both the efficient level of driver precaution and the efficient number of weekday accidents.
Next, consider the harms caused by a different type of driver: pizza deliverymen who hit pedestrians. We will assume that the pizza industry is perfectly competitive, so the price of a pizza reflects the marginal cost of the ingredients, the labor to make it, and the cost of delivering it (including the pizzeria’s expected liability). Also assume that consumers are smart – people understand the risks inherent in ordering and eating pizza.
(d) Explain why both strict liability and negligence rules would lead to efficient precautionby pizza delivery drivers.
(e)Would a simple negligence rule lead to the efficient level of activity, that is, the efficiennumber of pizzas being delivered? Why or why not? If not, would the number of pizzas delivered be inefficiently high or inefficiently low?
(f) Explain why a strict liability rule leads to the efficient level of activity, and therefore the efficient number of pizza delivery-related accidents.
Explanation / Answer
(a) A strict liability rule means that the one who causes the accident is strictly liable for his acts and cannot claim that there was no negligence on her part. When a person is being held strictly liable for his wrongful acts, he would be more cautious and would drive carefully because she knows that she cannot claim that there was no negligence on her part. Therefore, this would lead to more precautious driving by the drivers.
(b) As mentioned above that a strict liability rule would make the drivers more precautious, this in turn would lead to less number of accidents. Also on weekdays, the amount which the drivers would drive is inelastic but once a strict liability rule is applied they would be responsive to the incentive and this would lead to lesser number of accidents.
The bicyclist activity would be higher than the efficient level as the bicylers would be more carefree when they would ride.
(c) A simple negligence rule as no incentive as such. It would just create more precaution, therefore, there would be more effective precaution but once the driver causes an accident he could claim that he was not negligent, therefore, it would lead to efficient number of weekday accidents.
(d) Both the strict liability rule and the negligence rule would create the same impact on the pizza delivery drivers because there is a risk associated with the accidents and the negligence of pizza delivery drivers. They need to compete in the market, therefore, they would be more cautious and would value the efforts put in the whole process more than normal drivers.